Question: 6 The company has an inventory of 1 000 units of

6. The company has an inventory of 1,000 units of pens that must be sold immediately at reduced prices. Otherwise, the inventory will become worthless. The unit cost that is relevant for establishing the minimum selling price is
(a) $4.50
(b) $4.00
(c) $3.00
(d) $5.90
(e) $1.50
7. A proposal is received from an outside supplier who will make and ship the high-style pens directly to the Class Company’s customers as sales orders are forwarded from Class’s sales staff. Class’s fixed marketing costs will be unaffected, but its variable marketing costs will be slashed by 20%. Class’s plant will be idle, but its fixed manufacturing overhead will continue at 50% of present levels. How much per unit would the company be able to pay the supplier without decreasing operating income?
(a) $4.75
(b) $3.95
(c) $2.95
(d) $5.35
(e) None of these.

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  • CreatedJuly 31, 2015
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